When you’re running a business, you may be personally liable for any actual or alleged breaches of the Corporations Act. And it’s not just large companies that are exposed – small and medium business owners and officers could be at risk as well.
Management liability insurance covers the costs of defending directors, managers and employees against any claims that are the result of their actions or decisions.
Why is management liability insurance so important?
Directors of private companies operate within an increasingly litigious environment and need to be skilled at responding to complex business problems, competing priorities and managing shareholders expectations, all while ensuring they are aligned and acting as a single cohesive unit – no small feat!
It’s fair to say you need to protect yourself personally in the event that a claim is made against a mistake or deliberate action you or your employees have performed.
If you’re faced with unexpected liability costs, management liability insurance can protect your business and personal assets, such as your home (if you’re a director), from being sold to cover the cost of paying claims.
What does management liability insurance cover me for?
One question that is often raised is – ‘Is management liability insurance the same as professional indemnity insurance”? The short answer to that is no. Management liability insurance covers the 'running' of a business whereas professional indemnity insurance covers a business for claims arising from the 'professional advice' it provides.
Management liability coverage includes:
- Employment practices liability – Covers payouts for claims of employment breaches, such as wrongful dismissal, bullying or discrimination
- Directors & Officers Liability – Protects your proprietary limited companies past, present and future directors, officers and managers against claims of wrongful acts, such as misrepresentation or breach of duty (subject to business size).
- Crime – Protects your business against claims such as employee or third party fraud (not all criminal activity is covered).
- Corporate liability – Covers costs that your business would incur if you need to defend and settle claims from outside parties alleging wrongful conduct, as well as investigation into the affairs of the company
- Statutory liability – Covers the cost of defence, fines and penalties under some statutes e.g. Work Health and Safety
- Defence costs – Covers your legal costs if your business ends up in court
Management Liability Insurance in Action (Claim Example 1)
The Client: A financial planner with 7 staff and a turnover of $500K
The Claim: An employee of the Insured lodged a complaint with the Human Rights Commission alleging that she had been sexually harassed by the manager and sought compensation of $1,100,000.
Outcome: The Insured was able to claim under the Employment Practices Liability section of the Management Liability Policy in respect to harassment and discrimination charges, settlement and legal defence costs in defending the claim.
Management Liability Insurance in Action (Claim Example 2)
The Client: A restaurant with 20 staff and a turnover of $800K
The Claim: A marketing firm was sued for misleading and deceptive conduct by one of the Insured’s competitors for advertising that the Insured restaurant employed a celebrity chef when this particular chef was actually employed by the competitor.
The marketing firm then joined the Director of the Insured to the proceedings alleging that they provided them with a verbal and written statement that this celebrity chef was employed in their restaurant.
Outcome: The claim was ultimately settled out of court for the amount of $50,000 with the Insured agreeing to contribute $25,000 to the settlement of the claim.
Want to learn more about management liability insurance?
If you want to learn more about how to protect your business with management liability insurance, get in touch with a management liability insurance specialist at BlueRock. We’ll make sure you have the right cover for you and your business.